Philip Hodgetts’ unique blend of business and production knowledge gives him insight into the current state of the industry, and a remarkably accurate look forward. Here he shares his thinking, and points to articles of interest from other sites, with context as to why they're interesting.

Once again it’s revealed how the major studios cheat profit share deals by stacking on fees they make up, and paying them to themselves from the film’s income. It’s a shady practice and the sooner these crooks are out of our business the better it will be. (Not any time soon I fear.)

This article not only shows how movies “don’t make money” even if they would under any normal accounting tradition, but outlines the specifics of how filmmaker Scott Derrickson was screwed out of his 5% “profit share” on one of his most well known films, The Exorcism of Emily Rose.

Mostly that’s what we know from other writing about Hollywood accounting. But the main reason I’m referring to it is the commentary from Mike Masnick:

They then discuss his new movie, Sinister, which had a $3 million budget (which shocks Smith, who insists it looks like a movie that’s much more expensive). Of course, in many ways, this goes back to the discussion we’ve been having here for many, many years — responding to the old school movie studio guys, who demand that we answer how could they possibly continue to make $200 million movies. One answer, which we’ve pointed out time and time again, is that the question is the wrong one. Any business should be asking how it can make its product profitably — not how it can keep its costs high. No one in the tech industry asks “how can we continue to make $5,000 computers?” They ask “how can we make profitable computers” and one answer is to make the product more efficiently. It’s great to see filmmakers like Derrickson not just get that, but then to celebrate what that means for him artistically and financially as well.

Agreed the system is all about “the system” and not really about artists and creators to the extent it should be.

Having said that, I’ve lived in the world and heard all the stories about smaller scale, passion-fueled projects that do amazing things for little money. There are numerous shining examples in the category.

The studio “system” continues to survive because there are still certain productions and large, amazing films that seem to, at this point, have to leverage the large studio system, because there really isn’t an alternative path on those. For larger, grander projects, there needs to be a significant “infrastructure” in place that is more managerial and less hands-on-creative. It is a necessary evil. Yet, I’m not endorsing the current entrenched, bloated system…it just currently lacks that alternative, and has a vested interest in propping itself up by any means necessary.

What probably needs to happen is to tear it all down and then rebuild it again (leaner, smarter, less legacy thinking). That is easier said than done, but nevertheless I see that as pretty much the only path. What results won’t be quite as lean-and-mean as the producer-direct-sales model of Louis CK et al, but certainly more efficient than what exists today, yet positioned for much larger scale projects.